What is position sizing?

Position sizing refers to the size of a position within a particular portfolio, or the dollar amount that an investor is going to trade. Investors use position sizing to help determine how many units of security they can purchase, which helps them to control risk and maximize returns.

Why is position sizing important in the forex market?

In fact, position sizing will account for the quickest and most magnified returns that a trade can generate. Here we take a controversial look at risk and position sizing in the forex market and give you some tips on how to use it to your advantage.

How should a trader determine a position size?

Traders should develop an informed, strategic methodology for determining the size of a trade, rather than randomly selecting a position or electing a pre-determined position size for all trades. Before determining a position size, a trader must first understand the appropriate stop level for a specific trade.

Why does my position size increase as my trading account grows?

Furthermore, it increases your position size (in absolute terms) as your account grows. Assuming that your trading account is increasing due to your trading skill, your position size depends on how well you trade. This is a logical link that allows us to earn more as we become better traders.